The planned Circuit of Wales motorsport race track and associated automotive business park in Ebbw Vale is under threat following what is understood to be legal differences as to whether Welsh Government support would be in breach of state aid rules.

The company behind the project Heads of the Valleys Development Company (HoVDC) has been in discussions with the Welsh Government and officials for the last three years with a view to a joint venture partnership approach.

It is understood that HoVDC is looking for the Welsh Government to provide £32m in repayable finance for the scheme. The race track, if built, is scheduled to host the British Motorcycle Grand Prix in 2018.

State aid rules 'stretched'

However, the project, which realistically would need to be agreed this week with purdah starting tomorrow in the lead up to the Assembly Election, could be under threat.

It is understood that the lawyers acting for the Welsh Government have concluded that a financial package may stretch aid rules.

However, it is also understood that legal advice has been taken as to whether the Welsh Government can provide what effectively would be a form of return on investment guarantee to investors.

This is understood to be the main stumbling block to getting a deal away. It is also understood that local authorities in the region that would benefit most from the project, were also approached to provide some form of underwriting. But this failed to materialise.

It also understood that HoVDC and Aviva have taken their own legal advice which concludes that any funding package from the Welsh Government would not contravene EU state aid.

Hundreds of jobs created

The project would use British produced steel and if approved this week would see 400 jobs in the first six months created on groundworks with 1,600 jobs, mainly sourced in Wales, created during its 24-month construction period.

Depending on final design the project could need up to 700 tonnes of steel.